The ASX share market continues to act with volatility, which could mean that some opportunities present themselves.
Not every business is going to be a good performer. But some companies are generating good levels of profit growth, which may be able to lead to good shareholder returns.
The below two businesses are ones that have been sold down recently, but are expecting more growth in the coming months:
Kogan.com Ltd (ASX: KGN)
Kogan.com is an e-commerce ASX share that sells a variety of products and services. It has white label offerings for things like mobile plans, health insurance, superannuation, credit cards and travel insurance.
The business also sells items like phones, TVs, fridges, office supplies, furniture, drones and gaming consoles.
Kogan.com reported continuing high levels of growth in its FY21 half-year result. Net profit after tax (NPAT) rose by 164.2% to $23.6 million, gross sales jumped 97.4% to $638.2 million, gross profit increased 126.2% to $112.9 million, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) grew 184.4% to $51.7 million.
Exclusive brands saw revenue growth of 114.9% year on year, with gross profit growth of 174.9%, resulting in a contribution of 55.9% to overall gross profit. Kogan Marketplace also saw gross sales growth of 194.3%.
The ASX share explained that there is still a strong pipeline of new sellers ready to be onboarded. Kogan.com is aiming to continually improve its marketplace platform, which allows the business to achieve ongoing growth without a corresponding investment in inventory. It also gives customers more choice.
Kogan.com is also pleased with its Mighty Ape acquisition – a New Zealand-based e-commerce business. In December 2020, Mighty Ape had $20 million of revenue and $5.4 million of gross profit.
The company continues to see increasing profit margins, which speaks of the economies of scale of Kogan.com. The overall EBITDA margin improved by 1.8 percentage points to 9.4% for the first half of FY21.
Management are confident that it can do even more things to delight its customers. Growth has continued in January 2021, with gross sales rising by 45% year on year. Gross profit grew 102% year on year, with adjusted EBITDA going up 90%.
According to Commsec, the Kogan.com share price is trading at 19x FY23’s estimated earnings, at the current price of $13.36.
Bubs Australia Ltd (ASX: BUB)
The Bubs share price is close to a 6-month low despite the goat milk infant formula business recently telling the market about a rebound in demand in the second quarter of FY21.
The ASX share said in its FY21 half-year result release that it’s now the number one goat formula brand in Chemist Warehouse and number two in both Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL). Bubs organic infant formula is now the number two organic formula brand in the two biggest Australian grocery retailers and the country’s leading pharmacy.
Bubs also said that there was “strong” consumer offtake sales for Bubs goat formula on Alibaba Tmall Global, up 121% over the prior corresponding period.
China direct export gross revenue of Bubs goat infant formula increased by 36%. Export gross revenue outside of China increased 44% year on year. Management are expecting sales momentum to continue across south east Asian markets.
Whilst there was a significant disruption to the daigou channel over the last 12 months, Bubs saw quarter on quarter growth of 36% between the first quarter and second quarter of FY21.
Despite all of the COVID-19 disruption to the ASX share’s most profitable channel routes, Bubs’ goat formula product margin was consistent at 34%.
Bubs executive Chair Dennis Lin said:
We can say that we can expect to achieve modest half on half gross revenue growth in the second half of FY21. We are confident we are well placed with strong foundations, brand share growth and a robust balance sheet to go forward with a sustainable and profitable expansion strategy to emerge as lead challenger brand once the crisis subsides and market dynamics stabilise.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO and Kogan.com ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended BUBS AUST FPO and Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.